As used herein, the term “opportunity” includes, for example, any specific business deal, product, distribution channel, customer, or other decision around which an end-user wants to perform economic evaluations. The term “portfolio effect” includes, for example, the economic relationships between opportunities, where the result of at least one opportunity is dependent on or related to one or more other opportunities.
Typically, existing systems and methods of analyzing opportunities do not account for dependencies and relationships between two or more opportunities. For example, in existing systems, the profitability of a particular customer or particular product is analyzed “in isolation” based on a static model of inputs and outputs. Similarly, risk is generally limited to a sensitivity analysis that tests the impact of various assumptions on a result (e.g. a net present value calculation). Traditionally, each of the “Assumption” variables affects only the item (e.g. product, customer) being analyzed. These, and other, drawbacks limit the effectiveness of existing opportunity analysis methods.
FIG. 1 is an example of a tornado chart, generated using a typical opportunity analysis method that does not account for portfolio effects. As shown in FIG. 1, the probability of each assumption and the effect it may have on the Net Present Value (NPV) is independent of each other assumption and of other opportunities.
Another drawback of existing systems is that they do not provide generic nomenclature and procedures for describing and encoding relationships between opportunities, suitable for inclusion in and use by enterprise software. Thus, with existing systems it is not practical to evaluate on an economic basis the interrelationships between opportunities. These and other drawbacks exist.